R-Squared Energy TV: Episode 2 – Environmentalist and Debunking Myths

This week’s episode of R-Squared Energy TV considers a couple of questions that I receive from time to time.

The questions are as follows:

You’ve called yourself an environmentalist in the past; can you expound on that? What causes do you support?

Do you get enjoyment out of debunking myths?

Next week’s episode will touch on the politics of energy, as well as the single most important question to ask when you encounter an energy claim that sounds too good to be true.

Readers who have specific questions can send them to ask [at] consumerenergyreport [dot] com or leave the question after this post (at the original source). Consider subscribing to our YouTube channel where you’ll be able to view past and future videos.

Although I have written thousannds of articles and a book about environmental issues, I don’t wear my evironmentalist hat unless I’m surrounded by others wearing one. The word is not that well defined, and to a lot of people that word has taken on a negative connotation, thanks in part to extremists (and idiots) who also wear that label …on their sleeve.

Most people spreading “bunk” think it is true. To me, that’s just as bad, or worse, than an intentional lie. In the age of the internet, there is no good excuse not to research what you’ve been told. To blindly accept information because it is what you want to hear is as destructive as making up your own BS. You’re just borrowing it from someone else (corn used for ethanol isn’t food, biofuel policy has no impact on food prices, corn ethanol consumes more energy than it produces, etc).

Reading something that you agree with or want to agree with is a warning sign to go see what the critics think. More times than I can count I’ve learned that what I read is not accurate thanks to critical thinkers like RR and Geroge Monbiot on the web. On the other hand, critique is sometimes an attempt to spread disinformation as well.

Reading something that you agree with or want to agree with is a warning sign to go see what the critics think. More times than I can count I’ve learned that what I read is not accurate thanks to critical thinkers like RR and Geroge Monbiot on the web. On the other hand, critique is sometimes an attempt to spread disinformation as well.

I’m glad you mentioned the importance of critical thinking…as it is lost for those who ignore finance and prefer to be concerned about the next energy crisis. This was an interesting list of quotes to consider for the critical thinkers. I’m sure someone could debunk all these working in Washington, DC and ignore the warnings, but for those of us who are in business…time to wake up!

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The following are 17 quotes about the coming global financial collapse that will make your hair stand up….

#1
Credit Suisse’s Fixed Income Research unit: “We seem to have entered
the last days of the euro as we currently know it. That doesn’t make a
break-up very likely, but it does mean some extraordinary things will
almost certainly need to happen – probably by mid-January – to prevent
the progressive closure of all the euro zone sovereign bond markets,
potentially accompanied by escalating runs on even the strongest banks.”

#2
Willem Buiter, chief economist at Citigroup: “Time is running out fast.
I think we have maybe a few months — it could be weeks, it could be
days — before there is a material risk of a fundamentally unnecessary
default by a country like Spain or Italy which would be a financial
catastrophe dragging the European banking system and North America with
it.”

#3 Jim Reid of Deutsche Bank: “If you don’t think Merkel’s
tone will change then our investment advice is to dig a hole in the
ground and hide.”

#4 David Rosenberg, a senior economist at
Gluskin Sheff in Toronto: “Lenders are finding it difficult to finance
their day-to-day operations with short-term funding. This is a lot like
2008 but with more twists.”

#5 Christian Stracke, the head of
credit research for Pimco: “This is just a repeat of what we saw in
2008, when everyone wanted to see toxic assets off the banks’ balance
sheets”

#6 Paul Krugman of the New York Times: “At this point I’d
guess soaring rates on Italian debt leading to a gigantic bank run,
both because of solvency fears about Italian banks given a default and
because of fear that Italy will end up leaving the euro. This then leads
to emergency bank closing, and once that happens, a decision to drop
the euro and install the new lira. Next stop, France.”

#7 Paul
Hickey of Bespoke Investment Group: “More and more, we are hearing
anecdotal comments from individual and professionals that this is the
most difficult environment they have ever experienced as the market is
like a fish flopping around after being taken out of the water.”

#8
Bob Janjuah of Nomura International: “Germany appears to be adamant
that full political and fiscal integration over the next decade (nothing
substantive will happen over the short term, in my view) is the only
option, and ECB monetisation is no longer possible. I really think it is
that clear and simple. And if I am wrong, and the ECB does a U-turn and
agrees to unlimited monetisation, I will simply wait for the inevitable
knee-jerk rally to fade before reloading my short risk positions. Even
if Germany and the ECB somehow agree to unlimited monetisation I believe
it will do nothing to fix the insolvency and lack of growth in the
eurozone. It will just result in a major destruction of the ECB‟s
balance sheet which will force an ECB recap. At that point, I think
Germany and its northern partners would walk away. Markets always want
short, sharp, simple solutions.”

#9 Dan Akerson, CEO of General
Motors: “The ’08 recession, which was a credit bubble that manifested
itself through primarily the real estate market, that was a serious
stress….This is much more serious.”

#10 Francesco Garzarelli of
Goldman Sachs: “Pressures on Euro area sovereign bond markets have
progressively intensified and spread like a wildfire.”

#11 Jim Rogers: “In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful”

#12
Dr. Pippa Malmgren, the President and founder of Principalis Asset
Management who once worked in the White House as an adviser to President
Bush: “Market forces are increasingly determining what the options are
and foreclosing on options policymakers thought they had. One option
which is now under discussion involves permitting a country to
temporarily leave the Euro, return to its native currency, devalue,
commit to returning to the Euro at a better debt to GDP ratio, a better
exchange rate and a better growth trajectory and yet not sacrifice its
EU membership. I would like to say for the record that this is precisely
the thought process that I expected to evolve,but when I proposed this
possibility back in 2009, and again in September 2010, I had a 100%
response from clients and others that this was “impossible” and many
felt it was “ridiculous”. They may be right but this is the current
state of the discussion. The Handelsblatt in Germany has reported this
conversation, but wrongly assumes that the country that will exit is
Germany. I think that Germany will have to exit if the Southern European
states do not. Germany’s preference is to stay in the Euro and have the
others drop out. The problem has been the Germans could not convince
the others to walk away. But, now, market pressures are forcing someone
to leave. Germany is pushing for that someone to be Italy. They hope
that this would be a one off exception, not to be repeated by any other
country. Obviously, though, if Italy leaves the Euro and reverts to Lira
then the markets will immediately and forcefully attack Spain, Portugal
and even whatever is left of the already savaged Greeks. These
countries will not be able to compete against a devalued Greece or Italy
when it come to tourism or even infrastructure. But, the principal
target will be France. The three largest French banks have roughly 450
billion Euros of exposure to Italian debt. So, further sovereign
defaults are certainly inevitable, but that is true under any scenario.
Growth and austerity will not do the trick, as ZeroHedge rightly points
out. Ultimately, I will not be at all surprised to see Europe’s banking
system shut for days while the losses and payments issues are worked
out. People forget that the term “bank holiday” was invented in the
1930’s when the banks were shut for exactly the same reason.”

#13
Daniel Clifton, a policy strategist with Strategas Research Partners on
the potential for more downgrades of U.S. debt: “We would expect
further downgrades, a first downgrade from Moody’s and Fitch and
possibly a second downgrade from S&P.”

#14 Warren Buffett on
the problems in the eurozone: “The system as presently designed has
revealed a major flaw. And that flaw won’t be corrected just by words.
Europe will either have to come closer together or there will have to be
some other rearrangement because this system is not working”

#15
David Kostin, equity strategist for Goldman Sachs: “The wide range of
possible outcomes on both the super committee process and the unstable
political economy in Europe drives our view that investors should assume
the worst while hoping for the best.”

#16 Mark Mobius, the head
of the emerging markets desk at Templeton Asset Management: “There is
definitely going to be another financial crisis around the corner”

If the Volt buying public gets nervous, be concerned that GM will see a slow down in sales with this report, and another “game changer” will need to surface for the public to put their children in these cars.

Predicting the future isn’t easy especially when one realizes that the act of making predictions often alters the future. If economists really could predict the future, we wouldn’t be in this mess.

As for the Volt battery, I see no technical problem. There may be a PR problem when the lay press gets done with its feeding frenzy to grab readership and advertising dollars. It is always looking for new victims.

Years ago my neighbor bought one of those glorified golf cart electric cars that use the same lead battery as all other cars, except more of them. It caught fire in the middle of the night and was hauled back to the dealership shooting sparks.

Gas tanks carry far more energy than a battery and are far more dangerous. Depowering a damaged battery will make it safer. There is a learning curve involved here.

The article you link to is unaware that the old style of lithium battery chemistry that was so unstable and kept igniting after being shorted has fallen out of use.

Predicting the future isn’t easy especially when one realizes that the act of making predictions often alters the future. If economists really could predict the future, we wouldn’t be in this mess.

Written agreements (or legislation) in business and finance don’t predict the future, but do set in place a series of events that will lead to future outcomes. Good intentions mean nothing when the devil in the details drive the market unfolding in the EU. There were a very tiny number of economists that were highly critical of the EU agreements which led to the events unfolding. I don’t call this prediction of the future. This is why Germany has refused to come to the aide of the EU and why France is likely to face major problems shortly unless Germany concedes. I hope they do not and a new global currency is put in place as the framework is already defined and plans are sheduled for this in the event the Euro enters crisis phase. I don’t see this as predicting anything in the future, but a global currency is what people want in the marketplace to peg other currencies and I believe they will get it when the financial system gets worse. The rest of the world is not likely to let the US and EU collapse their economies without a plan. I know the interbank market is not going to allow it to happen.

Let’s see what happens. The list of “public” comments above give us food for thought that the markets are concerned. That is the point. I don’t think anyone is predicting a collapse…I think they are preparing themselves for a set of policies and agreements to get us into the next phase of global monetary policy where China, Central Asia, Russia and Japan have more say.

I am a deeply concerned but cautiously optimistic young man, and I very much respect your work. I first became aware of your blog through the writing of Robert Bryce, but also saw you linked by that “misanthropic iconoclast” over at Al Fin. If you have any free time and would be open to the possibility, I would like to communicate with you via email – I have some quick questions.

Those are certainly some scary quotes, Walt. The list of potential threats that may doom us, seems to be never-ending.

I do not subscribe to doomsday events unfolding in 2012 using predictive and NASA modeling…whether man made or by planned alien attacks promoted in circles. My concern is that we are in new territory where bankers have never gone before, and governments need to shore up confidence in the market. While most of the populace and liberal/establishment bloggers are confident in the economic recovery, as a conservative I tend to broaden my data set beyond propoganda coming out of Washington on economics. Contrary to extreme views, I do not seen any doomsday events in the near future, but rather some major corrections unless they can continue this trend into 2012 and 2013…I’m skeptical they can.

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Indicatively, global GDP is about $63 trillion if one can trust any
numbers released by modern governments. Said otherwise, for the six
month period ended June 30, 2011, the total number of outstanding
derivatives surged past the previous all time high of $673 trillion from
June 2008, and is now firmly in 7-handle territory: the synthetic
credit bubble has now been blown to a new all time high. Another way of
looking at the data is that one of the key contributors to global growth
and prosperity in the past 10 years was an increase in total
derivatives from just under $100 trillion to $708 trillion in exactly
one decade. And soon we have to pay the mean reversion price.

What is probably just as disturbing is that in the first 6 months of
2011, the total outstanding notional of all derivatives rose from $601
trillion at December 31, 2010 to $708 trillion at June 30, 2011. A $107 trillion increase in notional in half a year. Needless
to say this is the biggest increase in history. So why did the notional
increase by such an incomprehensible amount? Simple: based on some
widely accepted (and very much wrong) definitions of gross market value
(not to be confused with gross notional), the value of outstanding
derivatives actually declined in the first half of the year from $21.3
trillion to $19.5 trillion (a number still 33% greater than US GDP).

I still believe that economic recovery in the USA and largely global economic recovery, will be the main source driving energy policy no matter who is elected our next President. Like the nuclear event recently in Japan, it was a game changer for nuclear policy worldwide…especially in Europe. I see the same think linking economics and energy policy.

The bill will monitize all asset classes (including trillions of private bank derivatives that are going into default) upon the American people. Of course, who cares…if the media does not bring up this on the front page of Reuters it must not be a problem…yet.

Well, it has already started. I know speaking out against bankers is highly upsetting to some people in many circles, but let’s just say I’m speaking out against their stealth operations to protect themselves while INSURING (literally) they have no risks to their bonuses or profits.

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Three years after taxpayers rescued some of the biggest
U.S. lenders, regulators are grappling with how to protect FDIC-
insured bank accounts from risks generated by investment-banking
operations. Bank of America, which got a $45 billion bailout
during the financial crisis, had $1.04 trillion in deposits as
of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous
temptation to dump the losers on the insured institution,” said
William Black, professor of economics and law at the University
of Missouri-Kansas City and a former bank regulator. “We should
have fairly tight restrictions on that.”

I know…some will argue…what does this have to do with energy? Well, everything. You will see who the government is picking as the winners and lossers in energy as usual. Another mountain of legislation is coming to “protect” the American people from terrible oil companies before the election (often passed in the first 100 days after the election). You can see these plans on each candidate website running for election. Watch the bankers pour (literally dump) money on these candidates like at no time in history to insure they have no risks in this coming correction. They did it wonderfully in 2008 when they threatened to totally collapse the economic system on Wall Street unless they got Congress to give the Treasury and Federal Reserve complete authority over the abillity to print debt without their consent. Now comes the real move to shift all of this private bank debt and risk to the public hands INSURING they will be protected.

It is time to watch not only energy policy, but also watch these bankers who love to remain stealth in their legislative agenda.

I could not help myself but to show people how the banks got $7.7 Trillion and it only makes one wonder what is going on now planning for the next crisis to save the bankers from their foolishness.

Let’s focus on the crude oil pipeline coming out of Canada and leave the bankers alone…the real evil is that stupid pipeline to deliver oil. Sad.

What the article shows is that the Federal Reserve can (and will/does) anything it wants to do without congressional or treasury approval going back to 1985. I can see why they refuse any audit and when they lie to congress they are immune from prosecution due to their power.

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The Fed didn’t tell anyone which banks were in trouble so
deep they required a combined $1.2 trillion on Dec. 5, 2008,
their single neediest day. Bankers didn’t mention that they took
tens of billions of dollars in emergency loans at the same time
they were assuring investors their firms were healthy. And no
one calculated until now that banks reaped an estimated $13
billion of income by taking advantage of the Fed’s below-market
rates, Bloomberg Markets magazine reports in its January issue.

$7.77 Trillion

The amount of money the central bank parceled out was
surprising even to Gary H. Stern, president of the Federal
Reserve Bank of Minneapolis from 1985 to 2009, who says he
“wasn’t aware of the magnitude.” It dwarfed the Treasury
Department’s better-known $700 billion Troubled Asset Relief
Program, or TARP. Add up guarantees and lending limits, and the
Fed had committed $7.77 trillion as of March 2009 to rescuing
the financial system, more than half the value of everything
produced in the U.S. that year.

“TARP at least had some strings attached,” says Brad Miller, a North Carolina Democrat on the House Financial
Services Committee, referring to the program’s executive-pay
ceiling. “With the Fed programs, there was nothing.”

Bankers didn’t disclose the extent of their borrowing. On
Nov. 26, 2008, then-Bank of America (BAC) Corp. Chief Executive
Officer Kenneth D. Lewis wrote to shareholders that he headed
“one of the strongest and most stable major banks in the
world.” He didn’t say that his Charlotte, North Carolina-based
firm owed the central bank $86 billion that day.